Throughput Accounting: Bottleneck Management (#44)

In this podcast, we cover how to spot a bottleneck, as well as how to manage it to maximize throughput. Key points made are:

  • A bottleneck is likely to be where a work backlog is present, such as a production workstation with a pile of inventory in front of it, waiting for processing. Bottleneck equipment tends to break down frequently, since it is constantly in use.

  • A bottleneck could also be designated as such; usually when a process is expensive to operate, so the capacity level is deliberately reduced to lower the associated costs.

  • A bottleneck operation should run at all times. This means overstaffing it, using lots of support staff, and reviewing incoming materials to ensure that they meet quality specifications.

  • It may be useful to raise the wages of employees working in the bottleneck area, to reduce employee turnover. Could also consider cross-training employees, so that more people know how to operate the process. Also, be willing to pay overtime in order to keep the process running.

  • May offload bottleneck work to a backup operation, even if it is not as efficient. Can also make sense to keep old equipment that would otherwise be sold off, if it can act as a backup to the bottleneck.

  • May also outsource work to reduce the load on the bottleneck.

  • Another option is to install a conveyor from the closest upstream work station to the bottleneck, in order to avoid breaks while the upstream work station piles up its output into a batch for delivery to the bottleneck.

  • Pay for the rush delivery of parts, when doing so will keep the bottleneck operational.

  • Add upstream work capacity, if doing so will build the inventory buffer in front of the bottleneck.

  • Manage the bottleneck intensively, to maximize the amount of time that it is operating.

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